Annual Report 2011 - Ford Motor Company
Annual Report 2011 - Ford Motor Company
Annual Report 2011 - Ford Motor Company
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Notes to the Financial Statements<br />
NOTE 13. VARIABLE INTEREST ENTITIES (Continued)<br />
We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in<br />
payment or otherwise is in default, except under standard representations and warranties such as good and marketable<br />
title to the assets, or when certain changes are made to the underlying asset contracts. Securitization investors have no<br />
recourse to our Financial Services sector or its other assets for credit losses on the securitized assets, and have no right<br />
to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or<br />
additional assets to the VIEs and do not guarantee any asset-backed securities, although <strong>Ford</strong> Credit is the co-obligor of<br />
the debt of a consolidated VIE up to $250 million for two of its securitization transactions. <strong>Ford</strong> Credit may be required to<br />
support the performance of certain securitization transactions, however, by increasing cash reserves.<br />
Although not contractually required, <strong>Ford</strong> Credit regularly supports its wholesale securitization programs by<br />
repurchasing receivables of a dealer from the VIEs when the dealer's performance is at risk, which transfers the<br />
corresponding risk of loss from the VIE to <strong>Ford</strong> Credit. In order to continue to fund the wholesale receivables, <strong>Ford</strong> Credit<br />
also may contribute additional cash or wholesale receivables if the collateral falls below the required levels. The balances<br />
of cash related to these contributions were $0 at December 31, <strong>2011</strong> and 2010, and ranged from $0 to $490 million during<br />
<strong>2011</strong> and ranged from $0 to $1.4 billion during 2010. In addition, while not contractually required, <strong>Ford</strong> Credit may<br />
purchase the commercial paper issued by <strong>Ford</strong> Credit's FCAR Owner Trust asset-backed commercial paper program<br />
("FCAR").<br />
VIEs that are exposed to interest rate or currency risk have reduced their risks by entering into derivative transactions.<br />
In certain instances, <strong>Ford</strong> Credit has entered into offsetting derivative transactions with the VIE to protect the VIE from the<br />
risks that are not mitigated through the derivative transactions between the VIE and its external counterparty. In other<br />
instances, <strong>Ford</strong> Credit has entered into derivative transactions with the counterparty to protect the counterparty from risks<br />
absorbed through derivative transactions with the VIEs. See Note 4 and Note 25 for additional information regarding<br />
derivatives.<br />
The following table includes assets to be used to settle the liabilities of the consolidated VIEs. We may retain debt<br />
issued by consolidated VIEs and this debt is excluded from the table below. We hold the right to the excess cash flows<br />
from the assets that are not needed to pay liabilities of the consolidated VIEs. The assets and debt reflected on our<br />
consolidated balance sheet at December 31 were as follows (in billions):<br />
Finance<br />
Receivables, Net<br />
and<br />
Cash and Cash<br />
Equivalents<br />
Net Investment in<br />
Operating Leases<br />
Debt<br />
Finance receivables<br />
Retail<br />
$ 2.5 $ 31.9 $ 26.0<br />
Wholesale<br />
0.5<br />
17.9<br />
11.2<br />
Total finance receivables<br />
3.0<br />
49.8<br />
37.2<br />
Net investment in operating leases<br />
0.4<br />
6.4<br />
4.2<br />
Total (a)<br />
__________<br />
$ 3.4 $ 56.2 $ 41.4<br />
(a) Certain notes issued by the VIEs to affiliated companies served as collateral for accessing the European Central Bank ("ECB") open market<br />
operations program. This external funding of $246 million at December 31, <strong>2011</strong> was not reflected as debt of the VIEs and is excluded from the<br />
table above, but was included in our consolidated debt. The finance receivables backing this external funding are included in the table above.<br />
<strong>2011</strong><br />
<strong>Ford</strong> <strong>Motor</strong> <strong>Company</strong> | <strong>2011</strong> <strong>Annual</strong> <strong>Report</strong> 123